Weighing up the idea of an electric car
Well-known entrepreneur, Elon Musk, launched the extremely popular Tesla Model 3, a mass-market electric car back in April 2016. Within a week of unveiling the Model 3, Tesla revealed they had taken 325,000 reservations for the car, a mass-market electric car. While the car was initially released in the United States, it accepts orders from around the globe, including South Africa, which has been earmarked to open its first dealership by the end of 2019.
According to Sean Pretorius, COO at Risk Benefits Solutions (RBS), as fuel prices continue to rise in South Africa, along with other living expenses, consumers are increasingly seeking alternative methods to save money.
“Apart from consumers becoming more aware and conscious of their impact on the environment, a feasible and user-friendly car that is cheaper to run than a gasoline car will be an attractive option to the local market.”
The Tesla 3 Model electric car is reported to offer a range of 346km per charge and a 0-100km/h sprint time of six seconds, as well as an autopilot feature.
Pretorius stresses as with every alternative, all aspects and the costs thereof need to be considered, from cost of electricity to insurance.
The obvious advantage, says Pretorius, is that electric cars will enable consumers to make significant cost savings on fuel. “While South Africa has experienced shortages with its power supply, the country hasn’t faced interruptions in a while, and at this stage it shouldn’t impact electric car owners’ ability to charge their vehicles. In terms of electricity hikes, these rates remain lower compared to fuel prices. Consumers will however have to be mindful of the number of electric vehicle charging stations available, apart from their place of residence.”
While cheaper to run than a gasoline or diesel car, the maintenance and repair thereof may be more expensive, and in turn, push up insurance premiums. He explains that unlike a gasoline run car – which contains various parts that need to be regularly serviced, such as the alternator, clutch, radiator or fuel pump – an electric car requires less attention, but more specialised maintenance due to the advanced technology of the vehicle.
“It can be more expensive to maintain or repair the vehicle due to the car’s expensive and specialist battery system. This will require the use of specialised mechanics to service the technology of the car.”
Pretorius adds that, at this stage, it is difficult to determine exact pricing structures for these vehicles, but that South African Insurers will take the lead from international Insurers given that most of these vehicles currently operate globally.
He says that when researching international trends, the rise in autonomous driving technologies could however decrease insurance premiums by $20bn globally by 2020 (research by Swiss Re and HERE2), as well as reduce road crashes by 80% by 2035 (Research by National Highway Traffic Safety Administration in the United States) given the improved advancement in the automotive safety technology.
“The insurance industry – both globally and locally – will seamlessly adjust to new vehicle products and enhancements as and when figures and research surrounding the average cost for a repair claim are available. In South Africa, we are already witnessing a general decrease in the cost of repairing vehicles as technology advances, so we expect this to be mirrored with electric vehicles with autonomous driving features.”
Apart from possible insurance implications, another cost to consider is the actual value of the vehicle. “In the United States, for example, government has provided incentives and tax breaks for those purchasing electric car owners, but currently in South Africa, consumers don’t have the option.”
He says that while this car will only be a feasible alternative for a portion of the local market given its retail value – estimated at approximately US$35 000, nearly R 500 000 with the exchange rate – it sparks the introduction into the market, and cheaper models will follow suit in time .
“As the market braces for this new wave of innovation, consumers need to be educated on the various aspects that could potentially impact their expenses, thereby allowing them to choose the most cost-effective option,” concludes Pretorius.